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A chatbot company enters Chapter 11
On October 12, 2026, Character.AI announced that it had voluntarily begun a Chapter 11 bankruptcy process in an effort to arrange a court-supervised sale. The company said its services would remain available during the process, but warned that a wind-down could follow if no suitable bid emerged.
A company for sale; personal conversations at stake
Chatbot platforms can hold deeply personal exchanges. A bipartisan coalition of state attorneys general, including Illinois Attorney General Kwame Raoul, raised concerns about privacy and child safety in the bankruptcy proceedings. The questions extend beyond the business itself: who might acquire the data, and how will it be safeguarded?
Bankruptcy is not an immediate shutdown
Chapter 11 allows a business to reorganize or sell assets under court oversight. Character.AI advised users that subscriptions and privacy practices had not changed at announcement and that account export or deletion options were available. Those company statements should be tracked as the process unfolds.
Apep Bar asks
When people treat an AI character like a confidant, should a bankruptcy court treat their chat histories like an ordinary corporate asset?
References and further reading
Reference 1 · Reference 2 · Reference 3
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